The Economic Power Of The Arts

The Guggenheim Museum in Bilbao, Spain. A new branch of the Louvre Museum in Abu Dhabi. The Tate Museum on the South Bank in London. The expanded Museum of Modern Art in New York. The new Disney Hall in downtown Los Angeles. These and many other new cultural facilities opening in cities around the globe represent a new trend in cultural institutions, but also a new strategy linking cultural expansion with economic development. From communist China to Republican Houston, local and national governments are turning to the arts to attract tourists, revive older neighborhoods in decline or simply express newfound pride and economic power.

Many factors reinforce this new trend, making it local and global at the same time: The need for expanding cities to reclaim abandoned areas, the rise of cultural tourism, and the desire to retain cultural identity in an era in which the Internet, outsourcing and travel threaten to homogenize the world. The trend has generated a new field of urban economics—the study of the economic impact of the arts industry—which influences the development policy of governments as well as the investment strategies of private business leaders, from banks to real estate developers. The ultimate model for using cultural development as an instrument of civic policy is the Lincoln Center for the Performing Arts, which used urban renewal powers and massive investment to transform Manhattan’s West Side. Beginning in the 1960s, the local population was removed, their housing torn down and replaced by the world’s first large-scale arts center.

The social impact was immediate but the Lincoln Center also gradually transformed the economy of the West Side and the entire city. This is the dream of urban planners throughout the world who link cultural and economic development. The Alliance for the Arts, through its earlier identity as the Cultural Assistance Center, in 1983 published the first study on the arts’ economic impact, in partnership with a bi-state business development agency, the Port Authority of New York & New Jersey. This report not only influenced the city of New York, stimulating a 300 percent increase in local arts funding in a decade. It also inspired similar studies in cities such as Barcelona and London.

The 1983 New York study and others that followed taught the current generation of economic planners that the arts pay a handsome dividend in terms of stimulating industries like tourism and development and improving the quality of life. The doomsayers predicting New York’s collapse in the 1970s didn’t count on the economic power of the arts to keep the middle class invested and to redevelop neighborhoods, from SoHo to downtown Brooklyn and Times Square. Like the exciting new architecture in Bilbao and Abu Dhabi, the focus of cultural development is more often than not on new buildings, but that can include the renovation of important older structures, such as the Palacio de las Bellas Artes in Mexico City and the Teatro Colón in Buenos Aires.

For the past two decades, this kind of building has reached a fever pitch in New York, amounting to several billion dollars. The cultural organizations are leading this phenomenon of capital building themselves, but they are the beneficiaries of unprecedented financial support from the private sector and from the municipal government. This building boom expresses strong confidence in the future of the cultural institutions and of the city itself. As a forthcoming study from the Alliance for the Arts, “Culture Builds New York,” makes clear, the largest source of funding for this construction activity is the private sector—individuals, corporations and foundations. But an important factor is a newly active public sector. The City of New York, having recovered substantially from the economic effects of recession and the terrorist attacks, and having extended its capital budget support to private institutions not housed in city-owned property, has become the largest single financier of these projects. Cultural development in the U.S. is usually a public-private partnership, with most of the funding coming from private sources. In most other countries, both the planning and funding are largely governmental. But the results are the same, if the projects succeed.

The Alliance for the Arts’ recent study, “Arts as an Industry: Their Economic Impact of New York City and New York State,” shows that the commercial and nonprofit arts industry in New York City generated 160,300 jobs and an economic impact of $21.2 billion in 2005. In the same year, arts-motivated visitors to New York generated $5.4 billion in economic activity. The arts clearly contribute to local economies by hiring a local workforce, engaging local businesses and paying local and state taxes. Beyond that contribution, every part of the industry plays a role in attracting visitors from other parts of the country and the world, making arts-tourism one of the strongest components of New York’s growing visitors market. Underlying the impressive numbers are the active relationships, which tie together the nonprofit sectors. For example, theatrical productions originate on noncommercial stages and move to Broadway, or the work of artists showing in commercial galleries is collected and displayed by museums. The arts industry, then, is a vital core of the economy of New York. Into this mix comes the commercial arts industry, the natural partner of nonprofit culture but also of civic leaders. Imagine the robust economies of Mumbai or Los Angeles without Bollywood or Hollywood. Imagine Miami without its annual art market bonanza, Miami Basel. This linking of two commercial art centers reflects the globalization of culture, with concentrations of producing, selling and collecting ranging from Mexico City to Shanghai and Beijing, or from London to Moscow. But let the world’s cities take heed: the commercial art market can take flight, following wealth or favorable conditions. The long-term benefits of the arts economy probably belong to world’s cities that combine public and private funds to develop museums, performing arts centers and arts districts for artists and their public.